This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Nvidia plans to gradually invest up to $100 billion in OpenAI.
- The agreement will support a massive planned data center build-out by OpenAI that could include 4 million to 5 million GPUs.
- Nvidia's portfolio of investments includes both customers and suppliers.
Nvidia (NASDAQ: NVDA) is at it again. Just days after surprising the market with a $5 billion investment in Intel, it's forming a similar tie-up with OpenAI.
However, the scale of this deal will be much larger: Nvidia plans to invest $100 billion in OpenAI over time as part of a project to build 10 gigawatts of artificial intelligence (AI) data centers, with millions of Nvidia GPUs powering OpenAI's next-generation AI infrastructure. Nvidia stock jumped 4% on the news, hitting an all-time high.
What's happening here?
The two companies signed a letter of intent for this "landmark strategic partnership" to further OpenAI's ambitions of achieving artificial superintelligence.
With 10 gigawatts, one could power between 4 million and 5 million GPUs, which Nvidia CEO Jensen Huang said is about the volume that the company will ship this year. The first phase of this ambitious project is expected to come online in the second half of 2026, using chips built on Nvidia's upcoming Vera Rubin platform.
OpenAI and Nvidia have already been working together for years, and OpenAI has run on Nvidia technology since its early days.
As for the $100 billion Nvidia plans to invest, the timeline is unclear. The chipmaker simply says it plans to invest that money "progressively as each gigawatt is deployed."
The companies said they would finalize the details over the coming weeks.
A familiar playbook
Nvidia has engaged in similar maneuvers before. It has built up a portfolio of investments in companies that are often its customers, and sometimes even its suppliers.
Among the public companies that Nvidia owns stakes in are CoreWeave and Nebius, the two leading AI neocloud providers; Arm Holdings, whose CPU designs it licenses; Applied Digital, with which it collaborates on high-performance computing data centers; and Intel, a struggling chipmaker that Nvidia just invested $5 billion in as part of a larger partnership.
The OpenAI deal, if it fulfills its ambition, would by far be Nvidia's biggest investment to date. It's also the most valuable company Nvidia has invested in. OpenAI was valued at $300 billion in its last funding round in March, but in August, it was flirting with a $500 billion valuation in its plan for a secondary stock sale.
While $100 billion is a huge amount of money for any company, it's a manageable sum for Nvidia, which will generate approximately that much in net income this year. Investing that much will also make it a major shareholder in OpenAI, but the move makes sense for Nvidia.
OpenAI is the largest and most influential AI start-up, and much of the money that Nvidia is investing will come right back to it via the purchases of GPUs to power those data centers. In fact, the investment serves as an incentive for OpenAI to buy Nvidia's products.
It also helps block challengers like AMD from cutting into Nvidia's huge market share lead in the data center GPU market.
Is Nvidia a buy?
Nvidia seems to be making all the right moves lately in AI, both technologically and strategically, and forming a network of partnerships should only entrench its market leadership. It also gives it a portfolio of investments that could deliver strong returns.
As long as the AI boom persists, Nvidia looks like a great stock to own. As recent reports by the likes of Oracle and others show, the dollars are still flowing into AI infrastructure. As they do, expect Nvidia's stock price to continue to move higher over the long term.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
